A closely watched gauge of economic activity says no recession headed for the US
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- The Conference Board's Leading Economic Index fell to its lowest level since April 2020.
- It marks the first time since July 2022 that the gauge is not signaling a recession ahead.
- Still, the indicator is pointing to "near-to-zero" real GDP growth in the coming quarters.
The soft landing camp just got another boost to its outlook for the US economy.
The Conference Board's Leading Economic Index– a gauge of future economic activity — dropped 0.4% to 102.7 in January, signaling the lowest level since April 2020 when the US economy was struck by the COVID-19 pandemic-spurred lockdowns.
It marks the 23rd straight month that the index has declined, but the decline has slowed sharply and most of the gauge's 10 indicators are now flashing positive. The fresh data prompted the Conference Board to announce that a recession is no longer imminent for the first time since summer 2022.
"The U.S. LEI fell further in January, as weekly hours worked in manufacturing continued to decline and the yield spread remained negative," the Conference Board's Justyna Zabinska-La Monica said on Tuesday.
"While the declining LEI continues to signal headwinds to economic activity, for the first time in the past two years, six out of its ten components were positive contributors over the past six-month period (ending in January 2024). As a result, the leading index currently does not signal recession ahead."
Still, the group added that despite no recession forecast for 2024, "near-to-zero" real GDP growth should be expected in the second and third quarters.
Stepping back, a recent wave of red-hot economic data has signaled a strong outlook and has pushed back against the market's expectations for imminent rate cuts from the Federal Reserve.
But experts including Citi's chief US economist Andrew Hollenhorst and economist David Rosenberg still predict a recession is coming this year. Hollenhorst this month emphasized potential weaknesses in the labor market, coupled with inflationary pressure and sluggish consumer spending, which could spark a recession in the middle of 2024.